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Rosetta Genomics Ltd. (NASDAQ:ROSG)

Q2 2008 Earnings Call Transcript

August 19, 2008 8:30 am ET

Executives

Joshua Gordon – Executive Director of IR

Amir Avniel – President and CEO

Tamir Kazaz – CFO and Corporate Secretary

Dalia Cohen – Chief Scientific Officer

Ronen Tamir – Chief Commercialization Officer

Raza Bokhari – Chief Development Officer

Analysts

Kevin Degeeter – Oppenheimer

Pamela Bassett – Cantor Fitzgerald

Richard lDrury – Constitution Research

Operator

Good morning, ladies and gentlemen, and welcome to the Rosetta Genomics 2008 second quarter earnings call. Today’s call is being recorded and will be available for 30 days on the company’s website. At this time all participants have been placed in a listen-only modeand the floor will be open to questions following the presentation. (Operator instructions)

It is now pleasure to turn the call over to Dr. Joshua Gordon. Dr. Gordon assumed the position of Executive Director of Investor Relations of Rosetta Genomics, sir you may begin.

Joshua Gordon

Thank you and welcome everyone to our second quarter earnings call. Today I am joined by Amir Avniel, CEO of Rosetta Genomics and Tamir Kazaz our Chief Financial Officer, Dalia Cohen, our Chief Scientific Officer, Ronen Tamir our Chief Commercialization Officer and Dr. Raza Bokhari, our Chief Development Officer will join us for the Q&A.

Rosetta Genomics released it financial results for 2008 earlier this morning. This report is available at our website rosettagenomics.com. If you would like to be added to Rosetta’s distribution list to immediately receive future news about Rosetta Genomics, please call our officers at 201-946-0561 and ask to speak with the Investor Relations department. Before we begin, I would like to state that some of the information presented here today may contain projections or other forward-looking statements regarding future events or the future financial performance of the company.

These statements are based on management’s current expectations and actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time-to-time with the securities and exchange commission, specifically the company’s annual report on Form 20-F and reports on Form 6-K.

These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. During today’s call, we will discuss major events that have taken place at Rosetta Genomics during the second quarter of the year. Amir will present the quarters business highlights, advancements in R&D, and marketing developments.

Tamir will then discuss the quarter’s financial results. Finally we will open the call for Q&A, and now I would like to turn over the call to our CEO, Amir Avniel. Amir.

Amir Avniel

Thank you Josh, it has been an exciting quarter for Rosetta Genomics and one with many milestones. The most notable achievement for the quarter was that Columbia University Medical Center received regulatory approval for the first Molecular Diagnostic for that they develop based on our technology. A bigger validating step for Rosetta Genomics and a confirmation of the ability to use our technology to develop a Molecular Diagnostics product from start to finish.

In June, we accomplished another significant milestone with the acquisition of a CLIA-certified testing laboratory with 34 employees and $2.7 million in expected revenue in 2008. The acquisition of this lab is expected to allow us to rapidly develop and validate our diagnostic tests in-house and become a fully commercial company in the fourth quarter of 2008.

The last important milestone achieved this quarter is our success in moving multiple new diagnostics up our pipeline, which is a validation of our microRNA products engine. These new tests have the potential to address unmet medical needs for gastric, bladder, colon, lung, and ovarian cancer. We will continue pushing forward this more oncology indications an additional indication for genetic disorder in women’s health and expect to announce more indications in the following quarter.

All this strengthens our conviction that using microRNA as biomarker with our technology may significantly impact the Molecular Diagnostic forward. We anticipate releasing more new products during 2009 and 2010 and hope to dramatically influence the way medicine is practiced today.

I will now comment on some of these events in more detail beginning with our acquisition of Parkway Clinical Laboratories in Pennsylvania. Parkway specializes in conducting clinical diagnostics tests and handles in excess of 170,000 specimens a year with an estimated $2.7 million in annual revenue.

Parkway is expected to breakeven in 2008. The acquisition of CLIA-certified lab will allow Rosetta Genomics to expedite and gain full control over the in-house development, validation, commercialization, marketing and sales of our microRNA based diagnostics tests. During the last month we expanded the lab to 11,000 square feet by adding a second location in Philadelphia, where we are installing our proprietary microRNA based diagnostics technology. We started the calibration of this lab and believe it will be fully operational shortly.

We expect that the first diagnostics test developed and validated by us will be commercially available through this facility in Q4 2008. Parkway has 34 employees who support the labs daily operations, marketing and distribution. These employees will now be incorporated into Rosetta Genomics headcount, which will now consist of 103 employees. The CEO of the lab, Dr. Raza Bokhari joins Rosetta full time as Chief Development Officer. And I would like to take this opportunity to extent a very warm welcome to Raza and the rest of his team on behalf of Rosetta Genomics.

Second important event in this quarter was the regulatory approval by the New York State Department of Health of the first ever microRNA diagnostic tests for clinical use that was developed and validated by Columbia University Medical Center based on Rosetta Genomics technology. The goal of these tests is to differentiate between two types of non-small cell lung cancer that are treated very differently. It is common today to treat advance non-small cell lung cancer, the more common of them two main form of lung cancer is the targeted molecular therapy Avastin, an angiogenesis inhibitor.

But Avastin can cause serious bleeding in over 30% of patients with a subtype of lung cancer called squamous cell carcinoma. There is therefore a great need for accurately differentiating between squamous and non-squamous non-small cell lung cancer. We believe this diagnostic product can help change the way lung cancer is treated today by defining the exact group of patients who may benefit the most from this targeted therapy. This is an example of personalized medicine, which is exactly what our diagnostic product is all about.

As I mentioned, receiving regulatory approval for this product from the New York State Department of Health by Columbia University Medical Center is a great validation and a step forward for Rosetta Genomics and we believe it will support the validation and approval of the tests that will be launched from our own lab. In order to obtain regulatory approval, Columbia University Medical Center use it should be chords in a blinded trial, using a single microRNA with two controls.

Columbia’s validation demonstrated 96% sensitivity and 90% specificity. We presented the information at the most recent ASCO conference and a paper describing this test was submitted for publication. Columbia is expected to offer test based on our technology later this year and we also expect to develop our own version of this test in our Philadelphia lab and introduce it to the market later this year.

We also give these tests as having a strong formal economic relational to payers due to the high cost of the current goals standard therapy by providing them with the first ever objective and standardized tests for this indication, with a market size of approximately 60,000 patients a year in the U.S. alone with an estimated price of $3000 for this test, we believe that this product has a significant market potential.

Once the product is on the market, you have got to start conducting multiple site trials in order to generate more data on our lung cancer and other tests and to create broad awareness in speed adoption of our test among pathologists and oncologists. We have already received great feedback from the expert oncologists we approached during the development and validation process and are continuously advised that there is a great need for this product.

One of our strongest assets is our unique product engine, the capability to discover and develop multiple microRNA diagnostic products at the same time. We expect the second test resulting from our product engine to be commercialized this year, one that will identify origin of a metastasis. In up to 90,000 cases a year in the U.S., metastases are discovered but pathologists cannot determine where the original tumor is located.

As a result this patient cannot get tumor specific therapy, and broad or platinum-based chemotherapy is often initiated, an ineffective and costly endeavor. To mitigate this problem, Rosetta Genomics is developing a test that identifies more than 20 types of cancer based on the each tumors unique microRNA fingerprint.

The test can precisely and objectively identify the origin of a metastasis and is called miRview Mets, miR from microRNA and Mets for metastasis. With a market of 90,000 patients in the U.S. alone and a target price of $3500, we see this product as having the potential of becoming Rosetta Genomics leading revenue-producing product in 2009.

In our recent article published in the April 2008 addition of Nature Biotechnology. We demonstrated that we could determine the origin of metastasis with 89% accuracy. Following the publication, we’ve received great feedback from both physicians and patients. So we are very proud of seeing years of hard work bearing fruit and of addressing this very important unmet need., Since we cannot offer the test commercially until we receive regulatory approval, we are referring patients who contact us to our collaborators with whom we are working to validate this test so they may have an opportunity to participate in the validation study.

We announced last week that Rosetta Genomics will collaborate with leading academic institutions in the prospective clinical validation study with 100 patients to further demonstrate the effectiveness of this metastasis identification product. We expect to be able to publish the result of this work during 2009.

We anticipate conducting many more similar studies for all our products in collaboration with leading instituting in the near future and are diligently working to advance such agreements.

Finally, the third product slated for release this year will help oncologist and pathologist differentiate between mesothelioma in asbestos induced cancer and in various adenocarcinomas in the lung or flora. This will enable physicians to direct the best therapy to the patients. As you know Rosetta Genomics mission is to become one of the leaders in the molecular diagnostic space.

Our goal for 2009 is to bring more innovative molecular diagnostic product to market and to achieve dominant molecular diagnostic position. We already announced that we are on the verge of commercializing the three products that I mentioned above, but we are also advancing development of three others, predicting the response of chemotherapy in ovarian cancer, determining the risk of recurrence after gastric cancer resection and differentiating between the two most common type of lung cancer, small and non-small cell lung cancer.

The first of this is designed to predict the response of ovarian cancer patient to treatment with platinum-based chemotherapy. There are approximately 190,000 cases per year of ovarian cancer worldwide and 22,000 cases in the U.S. Platinum-based chemotherapy in conjunction with debulking surgery is currently the gold standard for treating ovarian cancer patients.

However, approximately 20% to 25% of patients do not respond to platinum-based chemotherapy and require additional second-line treatment. Administering platinum-based chemotherapy to patients who will ultimately not respond may take up several precious months from them and it is a costly treatment. Furthermore, there is research that suggests that administering platinum-based treatment to patients, who subsequently do not respond to it, may actually hinder their response to the subsequent second-line treatment.

To address this need we have identified unique microRNA biomarkers that we believe we will assist in identifying ovarian cancer patients expected to be resistant to platinum-based chemotherapy. The second test is designed to predict the risk of gastric cancer recurrence; today’s gold standard treatment for most gastric cancer patients includes resective surgery followed by chemotherapy.

Gastric cancer recurrence after surgeries is estimated to occur in 50% to 80% of patients. As physicians cannot predict which patient will have recurrence, the common practice in the U.S. is to administer adjuvant chemotherapy following surgery. This type of one-size fits all treatment may be unnecessary for some patients and may significantly damage their quality of life. We have identified microRNA biomarkers that predict the risk of recurrence for non-metastatic patients after resection of the primary gastric tumor.

Patients that are identified as having a low probability of recurrence may not benefit from postoperative chemotherapy. There are approximately 900,000 cases gastric cancer worldwide and 22,000 cases in U.S. and we expect to the price will be several thousand dollars. We believe this test may significantly improve gastric cancer patients cure management around the world.

The third test which addresses, the largest market will be designed to differentiate small from non-small cell lung cancer. Lung cancer is the most common cause of cancer related deaths in men and women, withan estimated 215,000 patients diagnosedwith lung cancer each year in the U.S. alone. Non-small cell lung cancer accounts for 80% to 85% of cases. Before our patients begin treatments and experience lung cancer, pathologists must review the pathological material taken from the tumor.

We have identified unique microRNA biomarkers that are maybe used to differentiate small from non-small cell lung cancers. This is critical, because small cell lung cancer can be confused on microscopic examination with non-small cell carcinoma. Again this is one more example of Rosetta Genomics participation in the new world of personalized medicine using an objective test based on microRNA to differentiate on a molecular level between two type of lung cancer that are treated very differently.

Moving on, we are pleased to announce that the advancement in three additional diagnostic test. I will touch on this briefly, the first of these test is being developed to detect the presence of colon cancer by identifying microRNA signature in the patient’s serum using a simple blood test. This test has enormous market potential considering the fact that doctors recommend routine colon cancer screening for all people over 50 and studies show that compliance for these recommendation is low. Having a test that can identify high-risk patients may increase the compliance for colonoscopy exams and we help in increase early detection of this deadly disease.

Second test is being developed to help detect the risk of superficial bladder cancer becoming invasive. And third test is being developed to predict colon cancer risk of recurrence. We are planning to hold an investors day in November, where we’ll elaborate on these tests. If you wish to be notified on details for this event, please contact Dr. Joshua Gordon at our New Jersey office.

One of the goals for our academic collaboration is to validate our technology and publish our results in peer-reviewed journals. We recently announced the publication of one such study in journal Brain Pathology. In the study of Rosetta Genomics scientists and collaborators described the use of microRNA in accurately differentiating primary from metastatic brain tumors.

This study is yet another demonstration of the diagnostic potential microRNA holds in one of our sensitive and effective microRNA technologies. We expect additional studies to be published during the coming months. Beside journal publication, we have been busy presenting research abstracts at multiple conferences, such as ASCO and AACR, and are advancing research collaborations with some of the most prestigious academic institutes in the world.

The significant advancement of the nine diagnostics test coupled with multiple new high-caliber academic alliances and publications puts Rosetta Genomics in a great position to continue lead in the microRNA revolution. As we prepare for the certification of our clinical laboratory in Philadelphia we are simultaneously gearing up to finalize the transformation of our company into a full commercial entity.

Based on our markets research, conversation with stakeholders, and analysis of lessons learned from various commercial models of other Molecular Diagnostic companies,we decided to approach the market using the model normally used by pharmaceutical companies. We will soon start recruiting a sales team that will approach selected group of physicians in a structured and methodical way.

We plan to spend the time from now until launch of our first product recruiting a sales force which will undergo extensive training, covering all aspects of our products including the disease pathway, current diagnostic and therapeutic gold standards, and the competitive advantages offered by our test.

The initial sales forces will cover major urban areas to maximize efficacy and will grow in numbers as our products come to be adopted by the medical community. At the same time we understand that reimbursements is critical to the commercial success of our products and are therefore in the process of recruiting a dedicated reimbursement and management market teams to negotiate and secure reimbursement for our product. With that I would like to pass on the microphone to our CFO Tamir Kazaz who will discuss this quarter’s financial results. Tamir

Tamir Kazaz

Thank you, Amir, and good morning everyone. I would now review the consolidated financial results that we published this morning. Operating loss for the second quarter of 2008 was $3.5 million, which included a non-cash expense of $295,000 related to stock-based compensation. Compared with an operating loss of $2.7 million for the corresponding quarter of 2007, which included a non-cash expense of $282,000 related to the stock-based compensation.

Net loss for the second quarter of 2008 was $3.7 million or $0.31 per ordinary share compared with the net loss of $2.3 million or $0.19 per ordinary share for the corresponding quarter of 2007. Net loss for the six month ended June 30, 2008 were $7.6 million or $0.63 per ordinary share, which included a non-cash expense of $486,000 related to stock-based compensation compared with a net loss of $4.3 million, which included a non-cash expense of $487,000 related to stock-based compensation or $0.41 per ordinary share for the corresponding period of 2007.

Research and development expense of $2.2 million for the second quarter of 2008 and $4.6 million for the six month ended June 30, 2008 compared to $1.7 million and $2.9 million respectively for the corresponding period of 2007. Research and development remains the company’s largest expense and accounted for 62% of its operating losses. As of June 30, 2008, we had $14.9 million in cash, cash equivalents, short and long-term bank deposits, and marketable securities.

In July 2008, we’ve paid $1.9 million in cash for the purchase of Parkway Clinical Laboratories Inc., and our outlook of total cash usage for operating activities for the remaining six months of 2008 is approximately $6 million. As previously reported, due to the continuing uncertainty in the credit market the company continues to incur its long-term investment in auction rate securities, which as of June 30, 2008 were valued at $1.8 million.

I will now return the call back to Amir Avniel. Amir

Amir Avniel

Thank you, Tamir. Before our first microRNA technology approved for clinical use and acquisition of CLIA-certified Laboratory, Rosetta Genomics is in the final stage of transforming into a commercial diagnostic company by continuous advancing new innovations up our pipeline, we expect the upcoming months to be exciting and contribute significantly to the commercial growth of the company. I would now like to turn the call over to the operator and ask for your questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) The first question comes from the line of Kevin Degeeter from Oppenheimer, please go ahead.

Kevin Degeeter – Oppenheimer

Yes. Good morning, thank you guys. Hey one quick financial question is I may at the top, then maybe some questions regarding the sort of pre-launch activities. Perhaps if you can better help us to better understand the financial guidance in terms of use of cash of $6 million for the remainder of the year.

One point of clarification, assuming that excludes the acquisition of Parkway and secondarily. Could you just help me understand a little more clearly, I mean guess that some implies a decline in the cash burn rate for the second half of the year when we would expect, with the pre-launch activity, that the marketing line will be going up. So perhaps you could talk a little bit about just marketing expenses, going into the launch as well.

Amir Avniel

Sure, I think Ronen, you could start and I will continue the answer.

Ronen Tamir

Thanks Amir. Yes, Kevin obviously when we’re going to start getting recruiting the people and start paying for them being on our payroll, you are going to see a rise in marketing and sales expenses. But having said that, we believe that this is the good investment that should be done for the company and eventually it’s going to yield a positive return.

Now regarding the timing of that, I think we’re not in the position right now to disclose that. But having said that, if we’re planning for the first product to be launched in the fourth quarter, you need to assume that a couple of weeks before that, we will need to have everybody on board in order to go through the training and all the other activities that Amir mentioned during the call. Amir.

Amir Avniel

Yes, so as Ronen mentioned, definitely the focus of the company is now moving more to the commercialization. And as I mentioned we will recruit some sales force and we’ll prepare our sales to launch the products and some resources will go after that. We don’t expect right now, at this point, to increase significantly the burn rate monthly of our company.

Kevin Degeeter – Oppenheimer

Okay. I guess that’s helpful and sort of on the reimbursement front, can you give us a sense as to how you expect the products to be sort of reimbursed out of the box, at launch. And just see how your preliminary discussion with payers have gone in terms of there comfort level with the kind of $3,000 to $4,000 price point, that’s been suggested as a reasonable range for these tests.

Amir Avniel

Yes Ronen, please.

Ronen Tamir

Yes, so regarding our discussion with the reimbursement agencies, during our market research we interviewed, or third-party interviewed on a blinded basis, ten Medical Directors of the top national coverage managed care companies and I have to say that they had a very positive attitude regarding the reimbursement and the acceptance of this type of technology into their offering.

I think that Molecular Diagnostic companies that launched before us High Complexity Molecular tests has done a great job, both in explaining the technology and the value behind such a technology, as well as in educating the market to understand that the price tag of $3,000 to $4,000 per test, it has a fair value to what it brings into, both the managing of the patients, as well as the Pharmacoeconomics behind it.

We believe that each of our products has a very strong Pharmacoeconomics rational behind it. If we talk about treatments like Avastin, which costs about a $105,000 or CUP diagnostic, which cost probably over $20,000 today. We believe that we can contribute in a Pharmacoeconomics way, as well as contribute to the well being of the patients and helping the doctor treat that patient, which are all the goals of Managed Care Organization. So, during the market research they were very positive about that and they were not surprised to the price tag.

Kevin Degeeter – Oppenheimer

Okay. Great, congratulations. I’ll get back in queue.

Ronen Tamir

Thank you.

Operator

The next question comes from the line of Pamela Bassett with Cantor Fitzgerald. Please go ahead.

Pamela Bassett – Cantor Fitzgerald

Hi, thank you very much and congratulations on your progress. Can you hear me, okay?

Amir Avniel

Yes, thank you Pamela.

Pamela Bassett – Cantor Fitzgerald

Can you tell us how the accuracy if, say the first three tests that you’re planning to launch, compare to the current standard of care, with respect to accuracy and sensitivity?

Amir Avniel

Yes, definitely. Dalia

Dalia Cohen

Sure. If we start with the squamous and non-squamous, we’ll have all 90% sensitivity and specificity of today. There are some antibodies, which will be in use to identify squamous and non-squamous. We all know that, but they are not specific for the two tissue types. In addition it is very subjective to looking into the microscope and subjective to the pathologist who is reviewing those slides.

For the cancer of unknown primary, we have again over 90% specificity and accuracy and again we know today from leading physicians and pathologist that the antibody, as well as looking under the microscopic, is subjective. The antibodies are not specific and with all the other tests, basically, one must look on these as a puzzle with pieces that are not matching. There is no way today of doing this, to identify accurately their origin of metastases.

So, mesothelioma, compared to other metastases into the lung or the pleural, again we will think about very low specificity of metastases of antibody looking under the microscope and trying to identify their origin of those metastases into the lung into the pleural again with looking in the microscope. So we believe that our test will give a standard way to identify tissue origin and the tissue specific metastases.

Amir Avniel

I think if I can add on that. All these three tests that’s we are planning to bring into the market this year, for all of them, the specificity and the sensitivity is above 90%. The current standard right now, as Dalia mentioned, is some subjective test, mostly morphology and histology that the Pathologist is using to look under the microscope.

We know there is research, for example (inaudible) showing that the agreement with different pathologists is between 60% to 70% in the case of differentiating between adeno versus squamous. On the CUP, as Dalia mentioned, there is not exactly a golden standards right now that we can compare ourselves with, because the most oncologist and pathologists that’s we’re speaking with, after it becomes CUP, that’s what they call it, they call it cancer of unknown primary and we don’t know what to do with that. So, in that sense there is nothing to compare and we believe that our product can come and change this dogma. There are some products for the CUP that are now available in the market, but we are not sure what their specificity and sensitivity there. So, we cannot exactly comment on that

Pamela Bassett – Cantor Fitzgerald

Can you talk a little bit about the uptake you’re expecting and how the market will begin to absorb these products, will they be used side-by-side with current methods or do you see them as replacements and if so how long will that take?

Amir Avniel

Hey, Ronen, do you want to start.

Ronen Tamir

Sure, sure thanks for the question Pamela. We believe in the beginning, until we’re going to get reimbursement. The market is going to start-up relatively slowly and we’re prepared for that and this is why understanding that reimbursement is going to be a hurdle. We are not going to have a large sales force until the first reimbursements are going to start to coming in. Now having said that, we will do a lot of activity from get go with physicians, with centers, getting them introduced to our technology, letting them experience first hand our technologies, so naturally in the beginning we believe that this test is going to be done side-by-side to their current way of practicing medicine to date.

Having said that we believe that faster adoption is probably going to be in areas where a reference lab or a reference hospital is not there, mainly community hospitals and so on and so forth, where the pathologist is not specialized, there is more of a general pathology department that sees everything. And according to our research, this is where the pathologist need this type of test the most. And later on the adoption is going to come also in the larger and reference hospitals. So we’re going to do all of those activities in order to speed up introduction as well as get doctors acquainted and experience our technology. But having said as I’ve said in the beginning, we believe that the turnaround in the fast usage of our product is going to come when reimbursements will arrive.

Pamela Bassett – Cantor Fitzgerald

That strikes me as a bit counter intuitive. In another types of new product adoption patterns, often time its the thought leaders and the leading medical centers that used new technology and new tests first. So why do you think the smaller hospitals, without access to large reference labs, would be first inline to adopt these tests?

Ronen Tamir

I did not say that the majors would not adopt these tests. What I was saying is that according to our market research, if you have a medical center, where there is a specialized, let’s say that the first, the miRview Squamous test, which differentiates between squamous and non-squamous, if you have a pathology laboratory, which is specializing in cancer and in there they are pathologists who are specializing in lung cancer, they’re going to use the test only for certain portion of the tests in which its hard to differentiate.

Our records shows that in those laboratories, were there is no specialized pathologist, when the general pathologist is looking at everything, they are the ones who are faced with the bigger challenges when they need to come up with the very specific diagnostic in order to support decision making by the doctor. And they’re the ones that, during the market research, expressed the highest need for this new kind of standardized and objective test.

So, I did not say that, that there is not going to be usage or adoption of the technology, but if we are looking to where we believe the majority of revenue is going to start coming from in the beginning for the squamous, non-squamous test, the miRview Squamous, to believe that eventually it will be coming from those places once the technology has been adopted where they do not have access to those specialized pathologist.

Pamela Bassett – Cantor Fitzgerald

Okay, thank you, one last…

Raza Bokhari

This is Raza Bokhari, if I could add something to what Ronen just said. With respect to the timeline, which you said was counter intuitive,just to elaborate on that, in the Heartland of America there are all these community hospitals and while there is a desire and a need for patients to run up to academic centers, but due to limitations of resources within the economic downturn of the cycles that we go on into the economy.

There is a thrust by physicians, oncologist and pathologist that are spread out in the far flung areas, that if is was a readily accessible state of the art test available to them, there is a trend or leaning for them to adopt it, which is not to take away from the importance of thought leaders and leading academic centers of medicine that adopt the new frontiers of redefining how medicine is practiced and is evolving in our nation. So, I wanted to make sure that I can somehow help to elaborate that will give you a better understanding of why we believe that there will be an adoption of this test at an increased base in community settings.

Pamela Bassett – Cantor Fitzgerald

Okay, thanks a lot.

Dalia Cohen

I would like to add to want Raza had just said, is that we have a collaboration with major hospitals, which the community center are looking upon. And it’s clear that’s we have good collaboration that we lead our product and that will help the community hospital to use them as well.

Pamela Bassett – Cantor Fitzgerald

Okay Ronen, thank you and there was some mention of acknowledgement of the challenge of reimbursement. So, can you talk about the lead time in getting these reimbursements codes that will be used for the first few products, as well as any codes are going to be used upon initial launch?

Tamir Kazaz

Sure.

Pamela Bassett – Cantor Fitzgerald

(inaudible), versus initial?

Amir Avniel

Hey, Ronen?

Ronen Tamir

Yes, so we’re looking at all that right now and we are now in discussion with reimbursement. Reimbursement is actually going to help us set the strategy, and we’re really looking into couple ways in what codes should be used, so on and so forth. Having said that, one has to acknowledge the fact that this is a completely new medical field in microRNAs, where the CPD code has been writtenwere not common using other diagnostics or therapeutics. So, we are looking into understanding exactly what should be made and how to approach that, there are a couple of strategies that we’re considering and I’m sure that on our next call, we’ll be able to elaborate more on that.

Pamela Bassett – Cantor Fitzgerald

Okay, thank you.

Amir Avniel

Thank you, Pamela.

Operator

Thank you. Ladies and gentlemen, we currently have no further questions coming through. (Operator instructions) We have a question from the line of Richard Drury from Constitution Research . Please go ahead.

Richard Terry – Constitute Research

The Oppenheimer analyst asked a good question about the burn rate and the fact that it’s seemed to be in fact decelerating in the second half of this year compared to the first half, and that would be counter intuitive, in that the marketing expenses should be ramping in the second half. And I’m not sure that we got a clear answer as to why that dynamic is in place, and again is the Parkway acquisition part of the second half burn rate projection?

Amir Avniel

Hey Tamir, do you want to start to answer this question and I will continue from there.

Tamir Kazaz

Yes, during the second half of 2008 we reduced the budget especially of our expenses in Israel and become more effective with our operating expenses. Marketing expenses will increase at the last quarter of 2008. The $6 million and overlook expense for the second half of 2008 includesonly the expenses for Rosetta Genomics, not the consolidated expenses. This is not including Parkway. Parkway is basically breakeven, so it’s really not an influence on our current burn rate.

Richard Terry – Constitute Research

Okay. Is there any allowance in there for revenues from tests coming up in the burn rate?

Tamir Kazaz

No. Currently the $6 million overlook is only for operating expenses for Rosetta Genomics.

Richard Terry – Constitute Research

I gotcha, all right that makes sense. So another words, the burn rate in the second half is going to be less than it would have otherwise been, simply because you’ve chopped operating expenses in Israel and that’s more than an offset to the hike in the marketing expense in the second half, correct?

Tamir Kazaz

Correct. Yes.

Richard Terry – Constitute Research

Okay. That’s good, and thank you very much, that was my question.

Tamir Kazaz

Thank you.

Operator

Thank you. We have no further question coming through. So, I’ll hand you back to your host to wrap up today’s conference.

Amir Avniel

I would like to thank everyone for listening, and hope you will join us on our next earnings call. Thank you.

Operator

Thank you for joining today’s conference. You may now replace your handset.

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